Wallmart and South African Expansion

1. Wal-Mart Case Study

Question 1:

What are Wal-Mart's competitive advantages? Its strategy is to sell goods at low prices on a daily basis, outsell competitors, and to expand. Wal-Mart does everything it can to win over competitors: build more stores, make existing stores bigger, and to expand into other sectors and regions of retail. These are major competitive advantages:

* Low cost distributor is driven by the simple promise of "everyday low costs" resulting in continuous focus on reducing prices by eliminating inefficiency in its operations as well as its supply chains. The decreased costs are passed on to the consumer which affects the price. Being able to offer lower prices to its customers that serve as a significant barrier to competitors seeking to compete on basis of price and product offerings.

* A highly efficient distribution and purchasing system enable Wal-Mart to be the lowest cost provider for majority of goods. Just In Time inventory system, allows retailers to avoid storing unnecessary inventory and keep storage associated costs to the minimum (Kerschberg and Jeong 2005).

* Economies of scale enable it to maintain its advantage as a low cost retailer in terms of advertising, information systems, distribution channels, knowhow and bulk buying.

* Wal-Mart retail sector dominance have massive bargaining power with its suppliers, equating in bulk discounts and lower margins from distributors therefore on average it can buy goods cheaper than that of its rivals.

* Un-unionised labour force, low salaries with limited benefits keeps employment costs lower compared to other grocery chains that compete with Wal-Mart.

* Wal-Mart has massive access to resources which helps them to rapidly expand, produce, buy direct, duplicate and negotiate the best prices with suppliers.

* Wal-Mart became a monopolistic retailer in many markets, which allows them to start dictating their own rules to suppliers and to some extent customers due to their size and core locations.

* Location, location, location, supported by good reputation by participating in various social projects, one stop shopping.

Question 2:

How sustainable are those advantages? A firm possesses a sustainable competitive advantage when its value-creating processes and position cannot be duplicated by other firms, (Oliver 1997). Wal-Mart is the leader in the retail industry and can be considered to have a sustainable competitive advantage. They have developed themselves to be the everyday low-price leader, with unique business practices, distribution capabilities, suppliers' partnerships, advanced data mining and workforce culture set them apart and give them the extreme completive advantage they have against other retail corporations.

It is almost impossible to copy a whole scope of the Wal-Mart interconnectivity, how do you copy electronic linkages and inventory information systems around the world. Relationship with suppliers were developed over long time and being supported by high volumes, making it competitors difficult as they lack purchasing volumes and the time it takes to develop a relationship. Their data mining capabilities are ever evolving, which keep them one step ahead of the competition supported by the employees culture which is very intangible and takes years of successful management and leadership to develop, making it almost impossible to copy.

They are able to sell their items at such low prices, and still generate a more than healthy profit by pushing volumes. Such interconnectivity makes it difficult and almost impossible to replicate in most of their competitive advantage aspects. Even though there is sometimes negative publicity around Wal-Mart's business practices and destroying small businesses, using questionable business and labour practices, the customer is still attracted by their prices and presence. This acts as a vicious circle, where the size of Wal-Mart, provides "Get out of Jail Card" and continues evolution in everything they do, ethically or unethically, thus sustaining its competitive advantage over their retail competition.

Question 3:

How transferable are those advantages as Wal-Mart moves into new formats and especially into new international locations? Let's have an assessment conducted in terms of:

Transfer to International Locations: Wal-Mart aggressively expanded to international markets by trying to pursue similar core values which insured their success in the past.

Problematic to transfer: In terms of data mining and information systems is difficult to build it, based on USA data as they are entering saturated and emerging markets with varying infrastructure and cultural differences at hand. Distribution capability often is linked to country's infrastructure, therefore Wal-Mart international expenditure often involves buying or partnering with existing retail groups. Cultural and labour implication of each country makes it difficult to replicate the same corporate culture and labour practices.

Easier to transfer;